LVMH delicatessen in Paris: Boom thanks to the weak euro
Photo: Philippe Wojazer/ REUTERS
Inflation, delivery problems, bad mood among consumers: none of this seems to be able to harm the globally active luxury brands.
In Europe and the USA, companies such as LVMH, Kering, Hermès and Prada recently posted record sales – worldwide sales and profits rose by 20 to 30 percent, and customers apparently accepted the price increases.
"The demand is there," confirms Arnaud Cadart, portfolio manager at Flornoy.
In contrast to other products, the customers of the manufacturers of luxury goods are wealthy people.
They are "less sensitive to inflation, the risk of recession or fears about their jobs," explains Cadart.
Business is going well worldwide - with the exception of China, where strict corona measures have recently led to a weakening of demand.
For example, the luxury brand Prada was able to increase its sales in Europe by 89 percent in the first half of 2022 - thanks to returning tourists.
The clothing manufacturer Moncler also benefited from the recent travel boom: the French group recorded a 42 percent increase in sales.
The weak euro in particular had a positive effect on the balance sheet of luxury item manufacturers: US customers in particular were happy to buy luxury items due to the strong dollar.
"In Europe, we are currently selling four times as much to US citizens as we did last year," says Jean-Marc Duplaix, chief financial officer of Kering, which owns luxury brands such as Gucci, Yves Saint Laurent and Balenciaga.
Just double the sales
The weak euro is therefore a double stroke of luck: Most of the production takes place in Europe, which is currently comparatively cheap due to the weak euro.
On the other hand, the products are often sold abroad – and paid for with the currently strong dollar there.
"We estimate that the euro zone accounts for an average of just 15 percent of the business figures of European luxury goods manufacturers," wrote the British bank HSBC in an analyst note in July.
The sector is thus benefiting “from a strong positive currency effect thanks to the weak euro exchange rate”.
The French group LVMH, world market leader among the luxury groups, attributes a quarter of its sales growth of 28 percent in the first half of the year to currency effects.
The manufacturers of luxury items can pass on the rising prices for primary products and raw materials to their wealthy customers with comparatively little trouble.
"So far, customers have not given a damn about these price increases," explains Monocle manager Pierre Michaud.
»Sales figures in France have increased by 41 percent – a record.«
Despite the overall uncertain economic prospects, the manufacturers of luxury items are therefore confident.
For example, the luxury goods manufacturer Kering announced in June that it intends to double sales of the clothing brand Yves Saint Laurent to five billion euros a year.
Ferrari aims to increase its sales to 6.7 billion euros by 2026 - an increase of 40 percent compared to the expected sales for this year.
mike/AFP
